L R AS Published on Saturday 2 May 2020 - n° 320 - Categories:miscellaneous financial
The crisis will favour large players with liquidity
The health crisis should separate the big developers from the small ones, as the crisis is tightening financial markets. It creates an opportunity for many large operators, whether solar or wind.
Some players are announcing a lot of advertising,
energy purchase agreements or asset disposals. They announce the launch of new projects. Is this so true?
Experts believe that the health crisis has fragmented the financing prospects of the renewable energy market in the United States and Europe. For those with cash ready to invest, projects that have become cheaper are an opportunity. But debt-backed contracts seem to be less common on both sides of the Atlantic. Some even claim that signatures are drying up.
The American RE project insurance company, Gcube, says that no one is reaching financial closure (obtaining financing) at the moment. "Most of the deals are dead now," even though banks and lawyers say otherwise.
Yet some of the biggest providers of fiscal equity for renewables in the US, including Bank of America and JP Morgan, say they are more active than ever. Large, well-capitalised developers seem to have little difficulty accessing the financing they need, reflecting the strong underlying demand for quality renewable assets.
For example, Engie has announced equity financing of up to $1.6 billion from Bank of America and HSBC, enabling the construction of 2 gigawatts of renewable energy. In another example, America's largest developer, NextEra Energy, says it has all the bank commitments it needs to get the tax credits it needs for its massive construction programme in 2020.
In contrast, many smaller developers will have trouble getting tax equity (tax credits) this year. This could force them to sell projects. "This could create project M&A opportunities for us," notes NextEra Energy, adding, "Some of these smaller developers will need a bailout plan, as they will face financial problems at the end of the year.
In Europe
Transactions are still under negotiation. Investors who do not need to resort to debt for projects should do well. "We're busier than ever," says Green Giraffe's managing director, adding: "The banks have a negative tone, but this could be part of a strategy to 'increase their margins'. For the time being, serious deals will receive funding and commitments on financial terms that are not so far off from pre-crisis levels. "There are several examples of transactions happening right now, benefiting buyers with cash.
The current market is benefiting buyers who can select the best offers.
In Europe, as in the United States,
As there is a wait-and-see attitude among lenders, the debt market is where the slowdown is most noticeable.
GreenTech Media of 27 April
Editor's note There is an economic observation that has always been made: in times of crisis, the big fish lose weight; the small fish disappear!
